Study Guide to Man, Economy, and State with Power and Market

46 Study Guide to Man, Economy, and State with Power and Market
make mistakes, and may decide ex post that they should
have chosen differently.
D. Planning and the Range of Choice
Individuals in a market economy form their own plans
based (in part) on the expectations of actions by other individuals.
There is no reason to suppose that “central planning”
will yield a better or more orderly outcome. In fact,
as Man, Economy, and State demonstrates, there are systematic
tendencies for the decentralized market pricing system
to coordinate individual plans.
6. Interrelations Among the Prices of Consumers’
Goods
Goods are related by their substitutability or complementarity,
as summarized on page 286. The more substitutes for any given
good, the greater the elasticity of its demand schedules will tend
to be.
7. The Prices of Durable Goods and Their Services
Durable goods (whether producer or consumer) yield a flow
of services over time. The price of a service is the rental or hire
price of the good; it is how much someone would pay to use the
durable good for a given period of time. The rental or hire price
is determined by the marginal productivity (if a producer good)
or marginal utility (if a consumer good) of the service.
The outright purchase price of a durable good is its capitalized
value, and tends to equal the (discounted) present value of
its total expected flow of future services. Because of time preference,
an actor will not evaluate a given unit of service in the
distant future the same as a unit of service available today or
tomorrow. The process of capitalization explains why finite